UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 19, 2002
RHOMBIC CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 0-28375 86-0824125
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
1475 S. Bascom Ave, Suite 210 Campbell, CA 95008
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (408) 371-2301
ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
On November 11, 2002, the board of directors of the Registrant approved the
issuance of 22,000,000 restricted shares of its common stock for the acquisition
of all of the issued and outstanding shares of Financial Software, Inc. ("FSI")
with two directors in favor and one opposed. The transaction was closed on
November 19, 2002. The value of the consideration in the exchange was determined
at arms length by FSI and the registrant.
FSI was formerly known as Wall Street Web, Inc. until it changed its name to
Financial Software, Inc. on November 6, 2002.
ITEM 4: CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Concurrent with the acquisition of FSI, the auditors for FSI, Malone and Bailey,
PLLC, were dismissed and James C. Marshall C.P.A., P.C., who is the registrant's
auditor, became the auditor for all activity subsequent to April 30, 2002 for
FSI. Prior to the acquisition by Rhombic, FSI was a privately held company and
not subject to any reporting requirements to the Securities and Exchange
Commission.
James C. Marshall C.P.A., P.C. has provided only audit and tax services to the
registrant in the past and has not performed any services prior to April 30,
2002 for FSI.
Malone and Bailey, PLLC were replaced and did not perform any work after their
audit of FSI for its fiscal year ended April 30, 2002. Malone and Bailey, PLLC
did not issue an adverse or disclaimer of opinion in their accountants report to
the stockholders of FSI for the years ended April 30 2001 and April 30, 2002.
The decision to replace Malone and Bailey was made by the board of directors of
FSI and there were no disagreements between FSI and Malone and Bailey.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
All required pro forma financial statements are being filed in this Amendment
No. 1.
The unaudited pro forma consolidated financial information of the Company,
included in Item 7(b) of this Form 8-K/A, is based on and should be read in
conjunction with the audited financial statements and notes thereto appearing in
the Company's annual report on Form 10-KSB for the year ended December 31, 2001
and the unaudited financial statements and notes thereto appearing in the
Company's Form 10-QSB for the nine month period ended September 30, 2002. The
pro forma financial information reflects all adjustments which are, in the
opinion of management, necessary to provide a fair statement of the results of
operations and financial position for the periods presented. The unaudited pro
forma condensed combined consolidated balance sheet as of October 31, 2002 and
condensed combined consolidated statements of operations for the ten months
1
ended October 31, 2002 and the year ended December 31, 2001 give effect to the
purchase by the Company of FSI for 22,000,000 restricted shares of the Company
at a deemed value of $1,100,000. Accordingly, the net assets of FSI were
recorded at their estimated fair value at the date of the acquisition. The pro
forma condensed combined consolidated statements of operations assume that the
acquisition took place at the beginning of each period presented and combine the
Company's and FSI's results of operations for the year ended December 31, 2001
and the ten months ended October 31, 2002. The unaudited pro forma combined
consolidated balance sheet combines the Company's balance sheet as of October
31, 2002 with FSI's balance sheet as of October 31, 2002, giving effect to the
acquisition as if it had occurred on October 31, 2002.
The unaudited pro forma condensed combined consolidated financial statements
have been prepared by the Company based upon available information and certain
assumptions that management believes are reasonable in the circumstances.
The unaudited pro forma information presented herein is shown for illustrative
purposes only and is not necessarily indicative of the results of operations,
future financial position or future results of operations for the Company, or
the financial position or results of operations of the Company that would have
actually occurred had the acquisition been in effect as of the earliest date for
the periods presented.
(a) FINANCIAL STATEMENTS OF FINANCIAL SOFTWARE INC.
Report of Independent Auditors ......................................... 4
Balance Sheet as of April 30, 2002 ..................................... 5
Statements of Operations and Shareholder's Equity for the
Years Ended April 30, 2002 and 2001 ................................... 6
Statements of Cash Flows for the Years Ended April 30, 2002
and 2001 .............................................................. 8
Notes to Financial Statements .......................................... 9
Unaudited Condensed Balance Sheet as of October 31, 2002 ............... 13
Unaudited Condensed Statements of Operations for the Six &
Three Months Ended October 31, 2002 and 2001 .......................... 14
Unaudited Condensed Statements of Cash Flows for the Six &
Three Months Ended October 31, 2002 and 2001 .......................... 15
Notes to Unaudited Condensed Financial Statements ...................... 16
(b) PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Combined Balance Sheet as of
October 31, 2002 ...................................................... 19
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Year Ended December 31, 2001 .................................. 20
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Ten Months Ended October 31, 2002 ............................. 21
Notes to Unaudited Pro Forma Condensed Combined Financial Statements ... 22
(c) EXHIBITS
10.1 * Stock Purchase Agreement
----------
* Previously filed with Form 8-K filed with the Commission on November 26, 2002.
2
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RHOMBIC CORPORATION
/s/ Albert Golusin
----------------------------
By: /s/ Albert Golusin Dated: February 6, 2003
Chief Financial Officer
3
INDEPENDENT AUDITORS REPORT
To the Board of Directors and Stockholders
Wall Street Web, Inc.
Westwood, New Jersey
We have audited the accompanying balance sheet of Wall Street Web, Inc., as of
April 30, 2002, and the related statements of loss, stockholders' deficit, and
cash flows for each of the two years then ended. These financial statements are
the responsibility of Wall Street's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wall Street Web, Inc. as of
April 30, 2002, and the results of its operations and its cash flows for each of
the two years then ended in conformity with accounting principles generally
accepted in the United States of America.
/s/ MALONE & BAILEY, PLLC
www.malone-bailey.com
Houston, Texas
June 10, 2002
4
Wall Street Web, Inc.
Balance Sheet
April 30, 2002
ASSETS
Cash $ 1,289
Office equipment and furniture, net of $27,847
accumulated depreciation 1,904
----------
TOTAL ASSETS $ 3,193
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 122,202
Accrued expenses 100,500
----------
Total Current Liabilities 222,702
----------
Stockholders' Deficit
Common stock, $.001 par, 100,000,000 shares authorized,
10,972,000 shares issued and outstanding 10,972
Additional paid in capital 972,707
Accumulated deficit (1,203,188)
----------
Total Stockholders' Deficit (219,509)
----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 3,193
==========
See summary of significant accounting policies
and notes to financial statements.
5
Wall Street Web, Inc.
Statements of Loss
For the Years Ended April 30, 2002 and 2001
2002 2001
------------ ------------
Sales $ 44,784 $ 120,544
Cost of sales 25,265 18,042
Selling 6,052 22,433
General and administrative 545,925 497,879
Depreciation 7,534 7,848
------------ ------------
Total costs of operations 584,776 546,202
------------ ------------
Net loss from operations (539,992) (425,658)
Interest income 3,010
Interest (expense) (235) (1,481)
Other income 363 6,241
------------ ------------
Net loss $ (539,864) $ (417,888)
============ ============
Basic and diluted net loss per common share $ (.05) $ (.04)
Weighted average common shares outstanding 10,800,917 10,622,750
See summary of significant accounting policies
and notes to financial statements.
6
Wall Street Web, Inc.
Statements of Stockholders' Deficit
For the Years Ended April 30, 2002 and 2001
Additional
Common Stock Paid In Accumulated
Shares Amount Capital Deficit Totals
------ ------ ------- ------- ------
Balances, April 30, 2000 10,124,000 $ 10,124 $222,805 $ (245,436) $ (12,507)
Shares issued for
- cash, net of expenses 567,500 567 288,483 289,050
Warrants issued for
- cash 450 450
- services 79,800 79,800
Net loss (417,888) (417,888)
----------- --------- -------- ----------- ---------
Balances, April 30, 2001 10,691,500 10,691 591,538 (663,324) (61,095)
Shares issued for
- cash, net of expenses 145,500 146 96,174 96,320
- services 135,000 135 84,865 85,000
Warrants issued for
- cash 1,680 1,680
- services 198,450 198,450
Net loss (539,864) (539,864)
----------- --------- -------- ----------- ---------
Balances, April 30, 2002 10,972,000 $ 10,972 $972,707 $(1,203,188) $(219,509)
=========== ========= ======== =========== =========
See summary of significant accounting policies
and notes to financial statements.
7
Wall Street Web, Inc.
Statements of Cash Flows
For the Years Ended April 30, 2002 and 2001
2002 2001
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(539,864) $(417,888)
Adjustments to reconcile net loss
to cash provided from operating activities
Depreciation 7,534 7,848
Common stock issued for services 85,000
Warrants issued for services 198,450 79,800
Changes in:
Accounts receivable 2,958 936
Accounts payable 49,771 67,355
Accrued expenses 100,500 (43,827)
Deferred revenue (3,385) (27,342)
Accrued expenses (43,827) 43,827
--------- ---------
NET CASH USED BY OPERATING ACTIVITIES (99,036) (333,118)
--------- ---------
CASH FLOWS USED BY INVESTING ACTIVITIES
Purchase of office equipment and furniture (6,112)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Sales of common stock and warrants 98,000 289,500
--------- ---------
NET DECREASE IN CASH (1,036) (49,730)
Cash at beginning of period 2,325 52,055
--------- ---------
Cash at end of period $ 1,289 $ 2,325
========= =========
Supplemental disclosures:
Interest paid $ 235 $ 1,481
See summary of significant accounting policies
and notes to financial statements.
8
Wall Street Web, Inc.
Notes To Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations. Wall Street Web, Inc. ("Wall Street") operated as a sole
proprietorship under the name Thomas Melillo DBA Stockrumors.com from December
1997 until April 1998 when it was incorporated in New Jersey as Wall Street Web,
Inc. Wall Street gathers and compiles information from contacts at financial
institutions and releases such information to subscribers, generally financial
and stock market professionals, through its websites, www.stockrumors.com and
www.brokercall.com on a timely basis. The Stockrumors website provides the
investing public with information concerning rumors regarding stocks and stock
markets. The Brokercall website allows the investing public to view analyst
upgrades and downgrades on companies.
Use of estimates. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from
those estimates.
Cash and cash equivalents. For purposes of the cash flow statement, Wall Street
considers highly liquid investments with maturities less than 90 days as cash
and cash equivalents.
Revenue recognition. Revenues are generated through the sale of subscriptions,
advertising banners, and sponsorships on Wall Street"s websites. Subscription
revenues are generally collected in advance on a monthly, quarterly,
semi-annual, or annual basis. Advertising revenues are generally derived from
agreements that provide for monthly fees and guarantee advertisers a specified
monthly utilization rate for Wall Street"s websites and additional advertising
time if there is a utilization shortfall. Subscription and advertising revenues
are recognized over their respective periods of the related subscription and
advertising agreements. Unearned fees, including fees related to utilization
shortfalls, are included in deferred revenue in the accompanying balance sheet.
Depreciation is currently being provided on the property and equipment used by
Wall Street using the straight line method over an estimated useful life of
three to seven years for all computers, equipment, and furniture.
Income Taxes. Wall Street recognizes deferred tax assets and liabilities based
on differences between the financial reporting and tax basis of assets and
liabilities using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to be recovered. Wall Street provides a
valuation allowance for deferred tax assets for which it does not consider
realization of such assets to be more likely than not.
Basic and diluted loss per common share is calculated by dividing the net loss
by the weighted average shares outstanding. There are no dilutive securities.
Stock options issued to employees are accounted for by following Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations, and by following the disclosure requirements of
Statement of Financial Accounting Standards No. 123, Accounting for Stock Based
Compensation, which established a fair-value-based method of accounting for
stock-based compensation plans. Stock options issued to other than employees are
accounted for by following Statement of Financial Accounting Standards No. 123.
9
Recently issued accounting pronouncements. Wall Street does not expect the
adoption of recently issued accounting pronouncements to have a significant
impact on Wall Street results of operations, financial position or cash flow.
NOTE 2 - OFFICE EQUIPMENT & FURNITURE
Office equipment and furniture are summarized by major classifications as
follows:
Computers $ 3,209
Office furniture 26,542
-------
29,751
Less accumulated depreciation (27,847)
-------
$ 1,904
=======
NOTE 3 - COMMON STOCK
In the year ended April 30, 2001, Wall Street sold 527,500 shares of common
stock to various investors through private placements for $305,000. In addition
to the shares sold, 40,000 shares were issued for costs associated with the
private placements valued at $.50 per share for $20,000, which was offset
against additional paid in capital. $15,500 of expenses incurred for the private
placements were also offset against additional paid in capital.
In the year ended April 30, 2002, Wall Street sold 145,500 shares of common
stock to various investors through private placements for total proceeds of
$98,000.
In the year ended April 30, 2002, Wall Street issued 135,000 shares of common
stock to various consultants for services valued at $85,000.
NOTE 4 - RENT EXPENSE
Wall Street rents office space on a month-to-month basis. Related rent expense
for fiscal 2002 and 2001 was $6,500 and $6,500 respectively.
NOTE 5 - INCOME TAXES
Deferred tax assets $ 230,000
Less: valuation allowance (230,000)
---------
Net deferred taxes $ 0
=========
Wall Street has net operating losses of $250,000 and $335,000 in 2002 and 2001,
respectively, which can each be carried forward 20 years.
10
NOTE 6 - STOCK WARRANTS
Wall Street issued 3,376,000 Class A Warrants for the year ended April 30, 2001.
2,666,000 were issued as a dividend, 665,000 were issued for services performed
by outsiders, and 45,000 were issued in connection with the sale of common
stock.
On October 25, 2000, the board of directors declared a dividend consisting of
..25 warrants for each share outstanding as of October 18, 2000. On October 18,
2000, there were 10,664,000 shares of common stock outstanding resulting in a
dividend of 2,666,000 warrants. Each warrant has a $1 exercise price and expires
three years from the date of issuance.
On October 25, 2000, 665,000 warrants were issued to outside consultants for
services. Using the Black-Scholes option-pricing model, $79,800 of consulting
expense was recognized for these issuances. Each warrant has a $1 exercise price
and expires three years from the date of issuance.
Between January 2001 and April 2001, 45,000 warrants were issued in connection
with the sale of 27,500 shares of common stock. A value of $.01 was assigned to
each warrant and credited to additional paid in capital. Each warrant has a $1
exercise price and expires three years from the date of issuance.
Wall Street issued 903,000 Class A Warrants for the year ended April 30, 2002.
735,000 were issued for services performed by outsiders, and 168,000 were issued
in connection with the sale of common stock.
In fiscal 2002, 168,000 warrants were issued in connection with the sale of
140,500 shares of common stock. A value of $.01 was assigned to each warrant and
credited to additional paid in capital. Each warrant has a $1 exercise price and
expires three years from the date of issuance.
In fiscal 2002, 735,000 warrants were issued to outside consultants for
services. Using the Black-Scholes option-pricing model, $198,450 of consulting
expense was recognized for these issuances. Each warrant has a $1 exercise price
and expires three years from the date of issuance.
Wall Street uses FASB Statement 123 to determine compensation expense for
warrants issued to non-employees. Compensation expense is based on the fair
value at the grant dates for awards under those plans consistent with the
Black-Scholes option-pricing model suggested by FASB Statement 123. During the
years ended April 30, 2002 and 2001, warrants issued to non-employees were
valued at $198,450 and 79,800 respectively.
Summary information is as follows:
No. of Exercise
Warrants Price
--------- --------
Balances as of April 30, 2000 0
Year ended April 30, 2001:
Issued 3,376,000 $1.00
Year ended April 30, 2002
Issued 903,000 1.00
---------
Outstanding at April 30, 2002 4,279,000
=========
11
Additional disclosures as of April 30, 2002 are:
Warrants Warrants
at $1.00 at $1.00
--------- ---------
Number of shares 3,376,000 903,000
Remaining life (months) 18 to 23 26 to 32
Currently exercisable warrants 3,376,000 903,000
Variables used in the Black-Scholes option pricing model include (1) 5.9%
risk-free interest rate, (2) expected option life is the actual remaining life
of the options as of year-end, (3) expected volatility is the actual historical
price fluctuation and (4) zero expected dividends.
NOTE 7 - RELATED PARTY TRANSACTIONS
There are two officers, each of whom work full time. They both have employment
agreements which called for a salary of $95,000 to each of them for the year
ended April 30, 2001. In fiscal 2001, both officers received less than the
amount in the agreements and elected to forfeit the remaining amounts owed to
them under their agreements. In fiscal 2002, a verbal agreement was made to pay
one officer $6,000 per month and the other officer $4,000 per month. As of April
30, 2002, $19,500 was paid under the agreement and $100,500 has been accrued.
12
Financial Software, Inc.
(formerly Wall Street Web, Inc.)
Unaudited Condensed Balance Sheet
At October 31, 2002
ASSETS:
Current Assets:
Investments held for sale-Note 3 $ 26,775
-----------
Total current assets 26,775
Office equipment-Note 2 29,751
Accumulated depreciation (27,847)
Intellectual property-Note 4 1,398,020
-----------
Total assets $ 1,426,699
===========
LIABILITIES AND STOCKHODLERS' EQUITY
Current Liabilities:
Accounts payable $ 95,147
Accrued expenses 131,823
-----------
Total current liabilities 226,970
Note payable-Note 4 275,000
-----------
Total liabilities 501,970
Stockholders' Equity: Note 6
Common stock, $$.001 par, 100,000,000 shares 20,000
authorized 20,000,000 shares issued and outstanding
Additional Paid-in-Capital 2,086,700
Accumulated defcit (1,181,971)
-----------
Total Stockholders' Equity 924,729
-----------
Total liabilities and stockholders' equity $ 1,426,699
===========
See accompanying Notes to Unaudited Condensed Financial Statements
13
Financial Software, Inc.
(formerly Wall Street Web,Inc.)
Unaudited Condensed Statements of Operations
For the Six and Three Months Ended October 31, 2002 and 2001
Six months Ended Three months Ended
October 31, October 31,
-------------------------- --------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
Sales $ 51,931 $ 28,032 $ 34,744 $ 12,270
Cost of sales 16,997 5,864 9,666 3,156
Selling 0 5,000 0 5,000
General and administrative 12,680 355,069 5,053 279,725
Depreciation 0 1,573 0 787
----------- ----------- ----------- -----------
Total cost of operations 29,677 367,506 14,719 288,668
----------- ----------- ----------- -----------
Net loss from operation 22,254 (339,474) 20,025 (276,398)
Interest income 0 0 0 0
Interest (expense) (1,036) (76) (711) 0
Other income 0 254 0 148
----------- ----------- ----------- -----------
Net loss $ 21,218 $ (339,296) $ 19,314 $ (276,250)
=========== =========== =========== ===========
Net loss per common share None $ (.03) None $ (.03)
Weighted average common
shares outstanding 11,122,467 10,696,500 11,266,391 10,710,667
See accompanying Notes to Unaudited Condensed Financial Statements
14
Financial Software, Inc.
(formerly Wall Street Web,Inc.)
Unaudited Condensed Statements of Cash Flows
For the Six and Three Months Ended October 31, 2002 and 2001
Six months Ended Three months Ended
October 31, October 31,
-------------------------- --------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ 21,218 $ (339,296) $ 19,314 $ (276,250)
Adjustments to reconcile net loss to
cash provided from operating activities:
Stock issued for services 0 20,000 0 20,000
Warrants issued for services 0 193,050 0 193,050
Depreciation 0 1,573 0 786
Changes in:
Accounts receivable 0 1,988 0 116
Investments held for sale (26,775) 0 (26,775) 0
Accounts payable (27,055) 29,782 (2,601) 4,174
Accrued expenses 31,323 51,539 8,288 22,500
Deferred revenue 0 (2,285) 0 (806)
----------- ----------- ----------- -----------
Net cash used by (1,289) (43,649) (1,774) (36,430)
----------- ----------- ----------- -----------
CASH FLOWS USED BY INVESTING ACTIVITIES
0 0 0 0
----------- ----------- ----------- -----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Sales of common stock and warrants 0 45,000 0 40,000
----------- ----------- ----------- -----------
Net Increase (Decrease) in cash (1,289) 1,351 (1,774) 3,570
Cash at beginning of period 1,289 2,325 1,774 106
----------- ----------- ----------- -----------
Cash at end of period $ 0 $ 3,676 $ 0 $ 3,676
=========== =========== =========== ===========
Supplemental disclosures:
Interest paid $ 1,036 $ 76 $ 711 $ 0
Non Cash Investing and Financing Activities
Issuance of common stock and
Note for Intellectual property $ 1,398,020 $ 0 $ 1,398,020 $ 0
See accompanying Notes to Unaudited Condensed Financial Statements
15
Financial Software, Inc.
(formerly Wall Street Web,Inc.)
Notesto Unaudited Condensed Financial Statements For the six
and three months ended October 31, 2002
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed interim financial statements of Financial
Software, Inc.,(formerly Wall Street Web,Inc.) have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and pursuant to the rules and regulations of
the Securities and Exchange Commission and should be read in conjunction with
the audited financial statements for the year ended April 30, 2002 and notes
thereto. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (consisting of only normal recurring accruals) necessary for a fair
presentation have been included.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America Requires management to make a
number of estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements. Such estimates and assumptions affect the reported
amounts of revenues and expenses during the reporting period. On an ongoing
basis, management of the Company evaluates estimates and assumptions based upon
historical experience and various other factors and circumstances. The Company
believes its estimates and assumptions are reasonable in the circumstances;
however, actual results may differ from these estimates under future conditions.
NOTE 2 - OFFICE EQUIPMENT
The computer equipment used by the Company is integral in its operations and has
been depreciated to its estimated salvage value of $1,904; therefore, the
Company did not record any depreciation during the six months ended October 31,
2002.
NOTE 3 - INVESTMENTS HELD FOR SALE
The Company acquired marketable securities for services completed during the six
months ended October 31, 2002. The value of the securities was recorded at
market value.
NOTE 4 - INTELLECTUAL PROPERTY
The Company acquired a software suite called Market Center during October of
2002 which has the following functions:
Database Web Integration
Client Tracking Financial Aggregation
Sales Force Organization E-Commerce Functionality
Lead Categorization
16
Financial Software, Inc.
(formerly Wall Street Web,Inc.)
Notesto Unaudited Condensed Financial Statements For the six
and three months ended October 31, 2002
NOTE 4 - INTELLECTUAL PROPERTY-continued
It acquired the software in an arms length transaction for its own shares and a
note with a total value of $1,398,020. The value of the software was determined
at an arms length based upon commonly accepted industry standard cost estimates
for writing and debugging software on a per line of code basis that had been
used by the buyer previously, in determining the cost of developing its own
software, and by consulting with various experts during negotiation in order to
verify that the per line code cost estimates used by the buyer were accurate in
respect to the industry as a whole, and finally, through negotiation with the
seller.
On November 19, 2002, the Company was acquired by the Rhombic Corporation
("Rhombic"). Rhombic plans to expand the business of FSI with new management. It
intends to incorporate all of the functionality of the Market Center product
into the core business of Financial Software Inc. and utilize all of the
possibilities offered by centralized database management, web access, client
profiling and sales force automation.
NOTE 5 - NOTE PAYABLE
The Company has a $275,000 note payable accruing interest at 8% per annum. The
note was issued in conjunction with the Company's acquisition of the software.
The monthly principal and interest payments due under the note are $16,258
maturing on April 30, 2004.
Principal and interest payments are not due, although accrued, under the note
until the Company is able to demonstrate sufficient positive cash flow to make
such payments or is able raise sufficient capital through the sale of stock
and/or notes to raise a minimum of four times the monthly payment due under the
note.
NOTE 6 - ISSUANCE OF COMMON STOCK
On October 29, 2002 the Company issued 9,028,000 restricted common shares at
approximately $.125 per share at a deemed value of $1,123,020 for software
applicable to the operating business. The acquisition included a $275,000 note
to the seller in addition to the restricted common shares.
This transaction did not result in the seller receiving a board position or
majority voting power of the Company.
NOTE 7 - SUBSEQUENT EVENT
On November 5, 2002, the Company filed with the Securities and Exchange
Commission a statement whereby it withdrew its previously filed Form SB-2 and
simultaneously filed a Form 15, thereby withdrawing from its reporting
requirements under the Securities and Exchange Act of 1934 in reliance upon Rule
12g-4(a)(1)(i).
On November 19, 2002, all of the outstanding stock of the Company was acquired
by Rhombic Corporation in exchange for 22,000,000 restricted shares of Rhombic's
common stock. Rhombic Corporation was the surviving company. Rhombic Corporation
plans to dissolve Financial Software, Inc. and consolidate its operations.
17
RHOMBIC CORPORATION & FINANCIAL SOFTWARE INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information gives
effect to the acquisition of Financial Software Inc. ("FSI"), by the Company
using the purchase method of accounting, after giving effect to the pro forma
adjustments described in the accompanying notes. The unaudited pro forma
condensed combined balance sheet is based on the individual balance sheets of
Rhombic Corporation as of October 31, 2002 and FSI as appearing elsewhere in
this filing and have been prepared as if the acquisition of FSI had been
effective October 31, 2002. The unaudited pro forma condensed combining
statements of operations combines the individual statements of operations of
Rhombic Corporation and FSI for the year ending December 31, 2001 and the ten
month ended October 31, 2002 on the basis that the acquisition occurred on
January 1, 2001.
The unaudited pro forma combined financial information reflects the application
of the purchase method of accounting for the acquisition of FSI. Under this
method of accounting, the purchase price was allocated to the assets acquired
and the liabilities assumed based upon their estimated fair values at the
closing. Estimates of the fair values of FSI assets acquired in the transaction
have been combined with recorded values of the assets of Rhombic Corporation;
however, changes to the adjustments included in the unaudited pro forma combined
financial data are expected as evaluations of assets are completed and as
additional information becomes available. Accordingly, the final pro forma
combined amounts to be included in the year end audited financial statements of
Rhombic may differ from those set forth herein.
Certain financial statement balances of FSI have been reclassified to conform
with Rhombic's financial statement presentation.
The unaudited condensed combined financial information does not purport to be
indicative of the operating results or the financial position that would have
actually occurred if the acquisition had been in effect on the dates indicated,
nor are they necessarily indicative of future operating results or financial
position of the combined operations. The unaudited pro forma combined condensed
information does not give effect to any cost savings or synergies that may
result from the integration of FSI's assets acquired in the transaction and
Rhombic's operations. No assurances can be given with respect to the ultimate
level of revenues or cost savings.
18
RHOMBIC CORPORATION & FINANCIAL SOFTWARE INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET
AT OCTOBER 31, 2002
Actual Pro Forma
--------------------------- -----------------------------
FSI Pro Forma
Rhombic FSI Adjustments Combined
----------- ----------- ----------- -----------
ASSETS
Current Assets:
Cash $ 1,221 $ 0 $ 0 $ 1,221
Investments 12,042 26,775 0 38,817
----------- ----------- ----------- -----------
Total current assets
Office equipment 0 1,904 0 1,904
Intellectual property 281,992 1,398,020 0 1,680,012
Deposits 6,900 0 0 6,900
----------- ----------- ----------- -----------
Total Assets $ 302,155 $ 1,426,699 $ 0 $ 1,728,854
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 27,160 $ 95,147 $ (61,864)(d) $ 60,443
Other payables 0 131,823 (102,357)(c) 29,466
----------- ----------- ----------- -----------
Total current liabilities 27,160 226,970 (164,221) 89,909
Note payable 16,000 275,000 0 291,000
----------- ----------- ----------- -----------
Total liabilities 43,160 501,970 (164,221) 380,909
STOCKHOLDERS' EQUITY
Common stock 30,000 20,000 20,000 (a) 52,000
22,000 (a)
Additional paid in 8,506,824 2,086,700 (2,130)(b) 9,573,474
Capital (2,000)(a)
(1,015,620)(a)
Offering costs (1,600) 0 0 (1,600)
Accumulated deficit (8,268,453) (1,181,971) 102,357 (c) (8,268,453)
61,864 (d)
1,015,620 (a)
2,130 (b)
Unrealized holding loss on
securities held for sale (7,476) 0 0 (7,476)
----------- ----------- ----------- -----------
Total stockholders equity 258,995 924,729 164,221 1,358,995
----------- ----------- ----------- -----------
Total liabilities and
Stockholders equity $ 302,155 $ 1,426,699 $ 0 $ 1,728,854
=========== =========== =========== ===========
See accompanying Notes to Unaudited Pro Forma
Condensed Combined Financial Statements
19
RHOMBIC CORPORATION & FINANCIAL SOFTWARE INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2001
Actual Pro Forma
-------------------------- ----------------------------
FSI Pro Forma
Rhombic FSI Adjustments Combined
----------- ----------- ----------- -----------
Sales $ 0 $ 21,399 $ 0 $ 21,399
Cost of sales 0 29,052 0 29,052
Advertising 0 12,516 0 12,516
General & administrative 493,973 636,207 (87,374)(c) 1,042,356
(450)(b)
Write down on Intellectual
property 404,158 0 0 404,158
Research & development 12,159 0 0 12,159
Depreciation 0 9,421 0 9,421
----------- ----------- ----------- -----------
(910,290) (687,196) (87,824) 1,509,662
----------- ----------- ----------- -----------
Net (loss from Operations (910,290) (665,797) 87,824 (1,488,263)
Loss on sale of Investments (72,464) 0 0 (72,464)
Other income (expense) 0 (385) 0 (385)
----------- ----------- ----------- -----------
Net Income (Loss) $ (982,754) $ (666,182) $ 87,824 $(1,561,112)
----------- ----------- ----------- -----------
Net loss per common share:
Basic $ (.04)
===========
Weighted Outstanding shares outstanding
Basic 37,928,561
===========
* Diluted Share computation is anti-dilutive
See accompanying Notes to Unaudited Pro Forma
Condensed Combined Financial Statements
20
RHOMBIC CORPORATION & FINANCIAL SOFTWARE INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
FOR THE TEN MONTHS ENDED OCTOBER 31, 2002
Actual Pro Forma
-------------------------- ----------------------------
FSI Pro Forma
Rhombic FSI Adjustments Combined
----------- ----------- ----------- -----------
Sales $ 0 $ 65,203 $ 0 $ 65,203
Cost of sales 0 23,553 0 23,553
Advertising 0 1,052 0 1,052
General & administrative 58,128 364,532 (14,983)(c) 405,997
(1,680)(b)
Write down on Intellectual
property 0 0 0 0
Research & development (9,183) 0 0 (9,183)
Depreciation 0 5,961 0 5,961
--------- --------- --------- ----------
48,945 395,098 (16,663) 427,380
--------- --------- --------- ----------
Net (loss) from operations (49,945) (329,895) 16,663 (362,177)
Loss on sale of Investments 0 0 0 0
Other income (expense) 0 (76) 0 (76)
--------- --------- --------- ----------
Net Income (Loss) $ (48,945) $(329,971) $ 16,663 $ (362,253)
--------- --------- --------- ----------
Net loss per common share:
Basic $ (.01)
==========
Weighted Outstanding shares outstanding
Basic 40,201,121
==========
* Diluted Share computation is anti-dilutive
See accompanying Notes to Unaudited Pro Forma
Condensed Combined Financial Statements
21
RHOMBIC CORPORATION & FINANCIAL SOFTWARE INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
Note 1. Basis of Pro Forma Presentation
The unaudited pro forma condensed combined financial statements reflect the
purchase of Financial Services Software, Inc. ("FSI"), a New Jersey corporation.
The unaudited pro forma condensed combined financial statements have been
prepared under the purchase method of accounting. On November 11, 2002, Rhombic
acquired FSI for 22,000,000 of Rhombic's restricted common shares at an agreed
upon value of $1,088,950. Both parties agreed upon the value in an arms length
transaction.
Under the purchase method of accounting, the total estimated purchase price as
shown in the table above is allocated to the assets acquired based on their
estimated fair values as of the date of completion of the merger. The
preliminary estimated purchase price is allocated to the assets acquired as
follows:
Assets acquired:
Marketable Securities $ 26,775
Equipment 1,904
Intellectual property 1,398,020
Less: assumed liabilities (337,749)
-----------
Total $ 1,088,950
===========
In accordance with the Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets," goodwill and intangible assets with
indefinite lives resulting from business combinations completed subsequent to
June 30, 2001 will not be amortized but instead will be tested for impairment at
least annually (more frequently if certain indicators are present). No goodwill
or other intangible asset, except the intellectual property acquired, was
created in the estimated fair value allocation of the purchase price.
Note 2. Intellectual Property
FSI acquired a software suite called Market Center during October of 2002 which
has the following functions:
Database
Client Tracking
Sales Force Organization
Lead Categorization
Web Integration
Financial Aggregation
E-Commerce Functionality
FSI acquired the software in an arms length transaction for its own shares and a
note with a total value of $1,398,020.
Rhombic plans to expand the business of FSI with new management. It intends to
incorporate all of the functionality of the Market Center product into its core
business and exploit all of the possibilities offered by centralized database
management, web access, client profiling and sales force automation.
22
RHOMBIC CORPORATION & FINANCIAL SOFTWARE INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
Rhombic is currently modifying the software for its planned mortgage brokerage
and mortgage banking business in order to utilize all of the functions already
developed in Market Center and merge them into a new program called FinanCenter.
FinanCenter will automate processing and client update communication, allow for
on-line completion of the mortgage application and completion of the funding
process with the consumer.
FinanCenter is a base collaboration and communications platform designed to
include both internal and external modules. Real estate professionals will be
able to pick and choose the relevant modules to allow fully customizable and
relevant information and applications for each client or member of the team.
FinanCenter will allow for both internally constructed modules and partnering
with outside firms for data as well as applications. FinanCenter will allow
modules and data to be added and removed as appropriate and for varying levels
of access between Rhombic, outside advisors, real estate organizations,
additional team members and clients.
Note 3. Pro Forma Adjustments
Pro forma adjustments are necessary to reflect the estimated purchase price of
FSI and to eliminate certain capital items of FSI. The net assets of FSI were
recorded by the Company at their estimated fair value. The unaudited pro forma
condensed combined consolidated financial statements do not include any
adjustments for liabilities resulting from integration planning or other costs
that may be associated with the integration of FSI with Rhombic.
The Company has not identified any pre-acquisition contingencies where the
related asset or impairment is probable and the amount of the asset or
impairment can not be reasonably estimated. Prior to the end of the purchase
price allocation period, if information becomes available which would indicate
it is probable that such events have occurred and the amounts can be reasonably
estimated, such items will be included in the purchase price allocation.
The pro forma adjustments reflected in the unaudited pro forma condensed
combined consolidated financial statements are as follows:
(a) The purchase transaction was for the entire company of FSI. The agreed upon
purchase price at arms length was $1,088,950 and was paid with restricted
stock of Rhombic. The purchase price of the net assets of FSI was agreed
upon in an arms length transaction and allocated accordingly. All common
stock and accumulated deficit amounts on the books of FSI were eliminated
and charged against additional paid in capital as part of the acquisition.
Changes to the purchase price allocation including changes to recorded
values of assets as a result of the acquisition may be necessary as
evaluations of assets and operations are completed and as additional
information becomes available. Accordingly, the final adjustments may
differ from those presented.
23
RHOMBIC CORPORATION & FINANCIAL SOFTWARE INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(b) Between January 2001 to April 2001, 45,000 warrants were issued by FSI in
connection with the sale of stock and the warrants were expensed for $450.
During fiscal year 2002 an additional 168,000 warrants were issued in
connection with the sale of stock and the warrants were expensed for
$1,680. The total of $2,130 was eliminated from the accumulated deficit and
general and administrative expense for years 2001 and 2002 because the
warrants were eliminated in the transaction with Rhombic.
(c) Officer salaries of FSI incurred and accrued between January 1, 2001 and
December 31, 2001 were $87,374. During January 1, 2002 to April 30, 2002,
officer salaries were $56,229 of which $14,983 were accrued. Total accrued
officer salaries of $102,357 were eliminated in the transaction with
Rhombic.
(d) An accrued expense by FSI of $61,864 pertaining to professional services
during the year 2000 were determined to not have provided a benefit to the
Company; therefore, it is not considered to be a liability of the Company
upon its acquisition by Rhombic. If it is later determined that this item
is a valid liability of FSI, then Rhombic may have a contingent liability.
24